Anyone checking out the 1Q report from CNX Resources today?  Their 7 year plan appears to allow for drilling only in SWPA & Eastern Ohio.   This is serious dial-back to further drilling in the CPA region and even portions of the northern tier of the SWPA core area. This has been a difficult time for E&P`s, and will they all follow a similar plan?

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check the marcellusgas.org website for this type of information

CNX has only really been successful unitizing and producing property around their already existing fee-gas acreage (acreage they own the oil and gas).  Their largest fee owned areas are Greene County PA and Marshall County WV.  Their management structure and processes are so out of whack they can't successfully put together units that involve leasing and getting assignments from other competitors.  Their eastern Ohio projects will die a slow painful death.

Could the fee-gas acreage be the reason they now have a 7 year plan for that region?  The fee-gas would be a boost to profitability right away., and a benefit over competition.   Any insights into their management structure and processes that cause problems?  How about their CPA region; what will happen here?

Yes the fee acreage is cheaper and more profitable to drill on.  Youre paying yourself the royalties for property that was purchased probably ages ago.  CONSOL predecessors bought the minerals for the coal and they ended up with the gas as well...for years they didn't even know they owned the gas.  That's how they got started in the gas business...they began running title on their coal properties and found out they bought the gas too.  

I worked for them from 2010 until 2015.  It was a mess.  Maybe they have improved some things but I highly doubt it considering the same people in the higher up positions are still there.  A company's organizational chart should be shaped like a pyramid.  Theirs is shaped like a ruler.  The middle managers don't connect processes so nobody besides your direct supervisor has any idea what you do, can do and how it relates to the greater scheme.   Case in point...The Land Department and the Land Analysis/Division Order Departments should share a common manager in the org chart. If not an immediate manager at least a director or VP level manager...correct?  At CNX the common manager for Land and Land admin was the CEO.  That is no exaggeration.  If Land and Land Admin had an issue it had to go all the way to the CEO.  They had land managers, asset managers , project managers...all three assigned the same duties.  At one time we had 3 different brokers/firms running title on the same properties.  One year the midstream group spent $1 billion and didn't lay a single foot of pipeline. When they sold the coal and the surface to Murray Energy they never assigned any pipeline ROWs for the lines going to and from the wells they had drilled on their fee surface and mineral property.  That means when Murray bought the surface they bought the pipelines as well....Took my department months to clean that up.  They literally had one guy who's sole job was to research EQT units and find if there was any property they trespassed onto CNX with so they could sue them.   I could go on and on and on...Look if I had property in a CNX project area I would dump it the first chance I get use those proceeds and buy property in another area.  They will never be successful outside of their Greene/Marshall County areas. 

Heidlebergman,  please check your message.

It seems odd that CNX hasn`t really established itself in many areas outside of Greene County.   Is the problem that they have much HBP acreage for old shallow gas leases from Dominion?  A lot of that acreage is not contiguous.  Is that a problem for them?

CNX sold pretty much all of the West Virginia acreage they received from Dominion to HG Energy in 2016 or 2017.  A lot of it was contiguous.  I don't know what happened to their PA acreage outside of Greene and the Pittsburgh airport.  Greene county PA geological speaking has the best Marcellus wells in the basin.  That and CNX does blend the Utica with the Marcellus so that they don't have to treat the Utica gas....really cut down on cost.  Greene Co. and Marshall Co is a stack play.  

If the old HBP Dominion leases in PA are not contiguous, would that be a problem with development since other gas companies need to become  partners?   Does CNX consider SWPA to be their prime area now?  Why does the Utica need to be blended with Marcellus gas?  CNX has sold most or all of it`s PA Dominion shallow wells to Diversified Gas & Oil, but they still have the deep gas lease rights.

Nice insight into CNX , thanks 

Heidlebergman,

I've followed CNX's activities in Westmoreland and Indiana counties in PA for the better part of the past decade and recall only seeing a sale/transfer of some of CNX's acreage in the northern part of Westmoreland County to the old Huntley and Huntley (now Olympus Energy) and a transfer/sale of some of CNX's acreage in southern Westmoreland to Chevron. Sure, there have been a few other land swaps here and there but CNX still retains a large block of contiguous acreage around Beaver Run Reservoir (Northern Westmoreland county) and along the Dominion Transmission TL-474 line in Indiana County. 

I was expecting to see a continued focus for more Utica wells in these two counties in 2021/2022 based on PADEP permits but CNX's most recent quarterly report said drilling has been delayed for 7 or more years. Seems odd considering CNX has touted the Utica in CPA in just about every quarterly report since 2017 yet they only have 4 producing Utica laterals there (with maybe 3 more laterals coming online this summer at the "wounded" Shaw pad following last year's blowout). Further, Utica Production costs are consistently reported as being half that of CNX's Marcellus acreage (2020 Q2 report actually shows $0.49 per MCF for Utica verses $1.33 for the Marcellus) but no drilling for 7 years?  I doubt CNX really means absolutely no more Utica drilling in CPA as they have spent the last decade consolidating acreage.  Much of the acreage around Beaver run was first leased in 2012 and is set to expire over the next couple of years if not renewed.

Any insight on why CNX would not direct production away from a higher cost field (Marcellus) to a lower cost field (Utica), especially taking into account how every dime counts in a sub $2.00 gas environment? 

 

Sure sounds like a great opportunity to develop further the CPA Utica, and take advantage of this significant cost differential with Marcellus.   Is CNX at risk that this cost differential may not be there in the future?

I'm going to say pipeline either midstream or transmission may be an issue.  I just don't know enough about DTI's network in CPA.

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